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TECH TALK: The Value of Vision: Blue Ocean Strategy

March 9th, 2006 · 4 Comments

I did not know of the term blue ocean strategy until recently. But it is a very good phrase to describe how entrepreneurs can think and build a vision around the future focusing on uncontested marketspaces. Clay Christensens ideas around using disruptive innovations to look at non-consumers are somewhat similar. The term white spaces is another common phrase. What they all do is provide a starting point for thinking about the future. The book, Blue Ocean Strategy, provides an excellent framework to think about the future. I have excerpted below some excerpts and quotes from the authors, W. Chan Kim and Rene Mauborgne.

The following is from an interview with Management Consulting News on their website:

Blue ocean strategy is about creating uncontested market space. Too many companies are swimming in the red ocean of bloody competition where there is limited room for real growth. The image of the vast blue ocean conveys the infinite possibilities for profitable growth that exist with this strategy.

Value innovation is a strategic move that allows a company to create a blue ocean. Typically, companies in the red ocean pursue incremental improvements for customers through either low cost or differentiation. Value innovation helps companies make giant leaps in the value provided to customers through the simultaneous pursuit of differentiation and low cost.

It shouldnt be a trade off between the two; exceptional value and innovation should be inseparable. Offer buyers a huge leap in value, and that will give rise to new markets. Thats how you make the competition irrelevant.

We begin by giving companies three pointers on how to break out of the red and into the blue ocean. Number one: stop benchmarking the competition. The more you benchmark your competitors, the more you tend to look like them. That makes you a me-too organization, which is the opposite of what you want to achieve.

Second: stop being content to swim in the red ocean. Many companies are caught up in competing and dont even look to the horizon of the blue ocean. And third: dont count on your customers for growth. Look to non-customers; they provide the most insights into how you can create new, uncontested opportunitiesnew demand for your products or services.

Here is another excerpt from an INSEAD Q&A with the authors: Blue ocean strategists recognize that market boundaries exist only in managers minds, and they do not let existing market structures limit their thinking. To them, extra demand is out there, largely untapped. The crux of the problem is how to create it. This, in turn, requires a shift of attention from supply to demand, from a focus on competing to a focus on creating innovative value to unlock new demand. This is achieved via the simultaneous pursuit of differentiation and low-cost. Under blue ocean strategy, there is scarcely an attractive or unattractive industry per se because the level of industry attractiveness can be altered through companies conscientious efforts. As market structure is changed by breaking the value/cost tradeoff, so are the rules of the game. Competition in the old game is therefore rendered irrelevant. By expanding the demand side of the economy new wealth is created. Such a strategy therefore allows firms to largely play a nonzero-sum game, with high payoff possibilities.

Tomorrow: Thinking Vision

TECH TALK The Value of Vision+T

Tags: Tech Talk

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